1 US and allies keep up pressure on the PRC before Third Plenum
NATO accuses PRC of backing Russia’s war effort
July 10
NATO held a summit in Washington D.C. and issued a communiqué. The communiqué strengthened its language on China and made the following noteworthy points:
- The PRC’s “stated ambitions and coercive policies” continue to challenge NATO’s “interests, security, and values.” Also, the “deepening strategic partnership between Russia and the PRC and their mutually reinforcing attempts to undercut and reshape the rules-based international order,” and are a “cause for profound concern.”
- The PRC has become a “decisive enabler of Russia’s war against Ukraine.” NATO urged the PRC to “cease all material and political support to Russia’s war effort,” including the “transfer of dual-use materials, such as weapons components, equipment, and raw materials that serve as inputs for Russia’s defense sector.” NATO warned that the PRC “cannot enable the largest war in Europe in recent history without this negatively impacting its interests and reputation.”
- NATO said that the PRC “continues to pose systemic challenges to Euro-Atlantic security,” including in cyberspace, space, and nuclear matters. NATO remains open to “constructive engagement” with the PRC, but is also “boosting our shared awareness, enhancing our resilience and preparedness, and protecting against the PRC’s coercive tactics and efforts to divide the Alliance.”
July 11
1. In a regular press conference, PRC foreign ministry spokesman Lin Jian said NATO’s Washington summit declaration was a “product of the Cold War mentality and full of belligerent rhetoric.” He added that the paragraphs on China were full of “biases, smears, and provocations.”
Lin also criticized NATO’s “reach into the Asia-Pacific,” adding that the alliance should avoid bringing “instability to the Asia-Pacific after it has done so to Europe.”
2. President Joe Biden said at a press conference, “Some of our European friends are going to be curtailing their involved investment” if China continues to aid Russia’s war effort in Ukraine. Biden also noted that China was not directly supplying Russia with weapons, but the former would not benefit financially if “they are supplying Russia with information and capacity.”
Measures by the US and allies with an eye on the PRC
July 8
Japan and the Philippines signed a defense agreement to deepen military cooperation and enhance their regional deterrence with an eye on the PRC. The agreement allows reciprocal access for the armed forces of both countries to train and conduct drills in each other’s countries.
July 9
1. Australia issued a rare warning against the PRC state-backed hacker group APT40. “APT40 has repeatedly targeted Australian networks as well as government and private sector networks in the region, and the threat they pose to our networks is ongoing,” the advisory note read.
A person familiar with the matter told The Wall Street Journal that the advisory note was the first time that Japan and South Korea had joined with Australia in attributing malicious cyber activity to the PRC, and also the first time that Australia had led such an effort.
2. Michael Carpenter, senior director for Europe at the National Security Council, said in previewing the NATO summit in Washington, “Certainly there are more partners that we have in the Indo-Pacific that are of great value to the NATO alliance. And we will seek to include other partners and other events in the future.”
Carpenter said that NATO and its Indo-Pacific allies have “a lot of common interests,” but added that NATO was “not expanding into the Indo-Pacific” because the alliance’s defense and deterrence capabilities are located in the Euro-Atlantic area.
However, that does not mean that NATO and its Indo-Pacific partners “shouldn’t be talking,” Carpenter said. “We should be cooperating, talking as much as we can, sharing threat perceptions. Certainly, Russia is a primary threat to NATO allies. But … the PRC has been directly providing support to Russia’s defense industrial base.”
3. US House Speaker Mike Johnson (R-La.) said at the Hudson Institute, “China poses the greatest threat to global peace. Congress must keep our focus on countering China with every tool at our disposal.”
He added, “In the short time remaining in this Congress … the House will be voting on a series of bills to empower the next administration to hit our enemies’ economies on day one.”
July 10
1. The U.S. and Mexico announced adjustments to American tariffs on steel and aluminum that would prevent tariff evasion by the PRC and other countries that ship products through Mexico.
Under the adjustments, steel product imports from Mexico will be subject to 25 percent tariffs unless the steel is documented to have been melted and poured in Mexico, Canada, or the United States. Meanwhile, aluminum product imports from Mexico cannot contain primary aluminum that is smelt or cast in China, Russia, Belarus, or Iran to avoid being hit with tariffs of 10 percent.
2. U.S. Treasury Undersecretary for International Affairs Jay Shambaugh told a Council on Foreign Relations event, “More creative approaches may be necessary to mitigate the impacts of China’s overcapacity. We should be clear: defense against overcapacity or dumping is not protectionist or anti-trade, it is an attempt to safeguard firms and workers from distortions in another economy.”
Shambaugh added, “We will take defensive action if needed, but we would prefer for China to take action itself to address the macroeconomic and structural forces that are generating the potential for a second ‘China shock’ for its major trading partners.”
July 11
Germany’s interior minister Nancy Faeser told reporters in Berlin that the German authorities have closed a deal with telecom providers to exclude Chinese companies such as Huawei and ZTE from the country’s 5G network products from 2029.
Faeser said that the deal was a crucial safeguard for digital security. She added that Berlin had informed Beijing about the deal and did not expect any retaliation over the move.
Recent PRC diplomacy and controversial moves
July 3
1. On the eve of the Shanghai Cooperation Organization’s annual leaders’ summit in Kazakhstan, Xi Jinping and Vladimir Putin met on the sidelines.
According to a readout from the PRC Ministry of Foreign Affairs, Xi told Putin that China and Russia should “keep upholding the original aspiration” of their “lasting friendship” in the face of “an international situation fraught with turbulence and changes.”
Xi added that both countries should make new efforts to safeguard their “legitimate rights and interests” and the “basic norms governing international relations.” Also, both countries should continue to “strengthen comprehensive strategic coordination, oppose external interference, and jointly safeguard regional tranquility and stability,” Xi said.
2. Taiwan said that the mainland Chinese maritime authorities boarded and seized a Taiwanese squid fishing boat that was near Taiwan’s Kinmen Islands but in PRC waters on the night of July 2. Taiwan’s coast guard said that the Taiwanese vessel was operating during the PRC’s no-fishing period and that Taiwan would communicate with the PRC to secure the fishermen’s release as soon as possible.
The PRC coast guard said in a statement that the coast guard from Fujian Province near Kinmen seized the Taiwan board because it had violated a summer ban on fishing and carried out illegal trawling operations.
July 4
In a speech at the Shanghai Cooperation Organization’s annual leaders’ summit, Xi Jinping urged member states to “consolidate the power of unity” in the face of “the real challenge of interference and division,” according to state broadcaster CCTV.
Xi said, “We should work together to resist external interference … and firmly grasp our own future and destiny, as well as regional peace and development, in our own hands.”
July 6
The Philippine coast guard (PCG) said that the PRC anchored its largest coast guard vessel in Manila’s exclusive economic zone in an intimidation effort. The PCG added that the 165-meter “monster ship,” which had also deployed a small boat, was anchored 800 yards away from its vessel.
July 8
The PRC and Belarus began joint military exercises just a few miles from the border of Poland in the city of Brest on the eve of the NATO summit in Washington. The Belarusian defense ministry said that the drills, codenamed Falcon Assault, will go on until July 19.
Belarusian special operations command chief Major General Vadim Denisenko said, “Events taking place in the world are alarming, the situation is uneasy, therefore we are going to practice new forms and methods of performing tactical tasks.”
July 10
Taiwan’s defense ministry announced that 56 PRC aircraft crossed the median line in the Taiwan Strait and entered Taiwan’s northern, southwestern and southeastern air defense identification zone.
Our take
1. Several factors likely led to NATO strengthening its language on China in the Washington summit declaration and the U.S. and its allies stepping up pressure against the PRC:
i) The situation in Ukraine has been looking grim since the first half of 2024. Russian forces have been taking Ukrainian territory and Ukraine’s forces, which lack munition and troops, are being stretched thin across the front.
Given Ukraine’s difficulties, the U.S. and its allies likely believe that targeting China would be one way to hamper Moscow’s war efforts and slow down Russia’s advance, as well as buy more time for Ukraine and NATO to win the conflict.
We previously assessed (see here and here) that the U.S. and its allies are likely to put more pressure on the PRC and that Sino-U.S. tensions are likely to escalate should the Russia-Ukraine war take a turn for the worse for Ukraine.
ii) The PRC continues to intimidate its neighbors in the South China Sea (particularly Taiwan and the Philippines) and carry out various provocative actions (including cyber attacks and military drills). While such behavior could have been ignored by the U.S. and its allies during the “engagement” years and when China’s economy was booming, they are now legitimate sources of concern in light of Russia’s invasion of Ukraine in 2022 and the CCP’s unwillingness to renounce its intention to seek “reunification” with Taiwan.
The moves by the U.S. and its allies either targeting or with an eye on China as listed above reflect the current geopolitical reality of democratic and U.S.-aligned countries becoming willing to get tough against authoritarian states to deter potential acts of aggression and safeguard national security. Those moves are also in line with the trend in recent years of countries learning more about the ambitions and operations of Xi Jinping and the CCP and taking steps to counter the PRC.
iii) The U.S. and its allies could believe that the PRC is currently more vulnerable to pressure and less able to lash out with effective countermeasures given the rapid deterioration of the Chinese economy, the ongoing “rectification” of the People’s Liberation Army, and the worsening of other domestic crises in China.
We previously analyzed that the U.S. and its allies could “step up pressure on Xi Jinping and the CCP if they believe that the purge of two former defense ministers underscores the PRC’s current vulnerabilities (military problems that are so severe that the CCP cannot engage in serious acts of aggression against Taiwan and in the South China Sea for at least a decade, economic recession, explosion of financial risks, etc.) and lack of ability to effectively retaliate.”
Pressure on the PRC could be prolonged and heightened going forward given the political consensus on China in Washington and other allied nations, as well as Beijing’s growing inability to entice countries with investment opportunities with the bleak economic situation in the mainland.
2. The PRC is unlikely to hit back at NATO beyond issuing its usual propaganda. Beijing will also likely continue using diplomacy and influence operations to divide the European nations, split the U.S. and the EU, and buy goodwill with countries in the Indo-Pacific in the hopes of weakening actions that nations are taking to punish or counter the CCP regime. However, Xi and the CCP’s options for lowering geopolitical tensions and risks will be increasingly limited as the Chinese economy worsens and the allure of China’s “vast markets” and “opportunities” vanishes.
Beijing is also likely to continue supporting Moscow and its war effort in Ukraine even in the face of NATO pressure, given the strategic importance of that course of action. That being said, the PRC could seek to back Russia through more covert and circuitous means, while ceasing some overt and direct support to give the appearance that it is “above board” with regard to U.S. and NATO’s accusations.
2 Analyzing the impact of the ‘edible oil poisoning’ scandal in China
Beijing News exposes scandal of cooking oil transported in dirty fuel tankers
July 2
The state-backed Beijing News reported that it had found several fuel tanker trucks carrying cooking oil without cleaning their tanks when switching between industrial oils and edible liquids.
One driver interviewed by Beijing News said that it was an “open secret” in the industry that truckers did not clean their tanks when switching between carrying toxic oils and edible oils. Another driver said in an undercover video by Beijing News, “I haul sugar, honey, molasses, cooking oil, and motor lubricant. I haul everything.” A third driver said that he usually did not pay the 400 to 500 yuan (about $55 to $69) to wash the tanks in his truck before changing cargo.
The Beijing News report implicated PRC state-owned food company Sinograin and sparked a huge public outcry. Chinese social media users and other mainland media began tracking allegations of contaminated tanks, with one individual tracing a suspect tanker delivering to the facility of leading cooking oil firm Yihai Kerry Arawana.
Yihai Kerry said it had a “comprehensive food safety system” and an internal investigation found all tankers supplying its facilities to have undergone “rigorous verification and inspection procedures.” Meanwhile, Sinograin said in a statement that it had launched a “thorough special inspection” and would blacklist any transport company found to be violating regulations.
July 12
The personal Weibo account of Han Futao, an investigative journalist with Beijing News who was involved in the contaminated fuel tankers report and had gone undercover to expose other social issues in China, was deactivated. It was unclear whether Han’s account was deactivated externally or by himself. Chinese netizens expressed concern about Han’s personal safety.
Ships reportedly involved in cooking oil transportation scandal
July 13
Caixin reported that there have been no dedicated ships transporting edible oils on both maritime and inland waterway routes for a long time, and the practice of transporting cooking oil in toxic oil-contaminated tankers is quite common.
Logistics platform disables truck tracking feature
July 10
The Chinese digital logistics freight platform “Fahuo Bang” (發貨幫), which allows users to track truck routes, saw a surge in access queries as people sought to trace the routes of “problematic oil tanker trucks” over the past six months. Subsequently, “Fahuo Bang” removed its truck route tracking feature.
July 11
Mainland media 21st Century Business Herald reported that some “self-media” outlets used the license plate numbers of fuel tank trucks disclosed by Beijing News to uncover a large amount of open-source data on truck routes on a freight platform and identify several companies involved in the transportation of edible oils in contaminated tankers.
Zhai Xuehan, the founder and CEO of logistics technology company G7 Easy Flow (G7易流), told 21st Century Business Herald that the routes of fuel tankers are all being recorded with today’s “Internet of Things” technology. Zhai added that cargo owners can quickly find out what the fuel tankers previously transported and whether they were sterilized by examining truck routes and shipment details.
CCP authorities react
July 8
1. After several days of silence, PRC state media began criticizing Sinograin for its unethical practices (無德) of transporting coal-based industrial oils and edible oils, saying that it amounts to “poisoning” (形同投毒).
2. Former Global Times editor-in-chief Hu Xijin wrote on social media that the practice of “loading soybean oil after unloading coal oil” is “extremely egregious” and constitutes a “dereliction of duty.” Hu said that the issue should not be resolved merely through Sinograin’s internal investigation, and that external regulatory agencies must intervene to assess the extent of the harm. He added that regulatory agencies must publicly disclose the results of the investigation and provide a full account to the public.
July 9
The PRC State Council commission on food safety said in a statement that the authorities would investigate the Beijing News report. The commission said “illegal enterprises and relevant responsible persons will be severely punished in accordance with the law” and it would also launch a “special study” of the safety risks in cooking oil.
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The CCP authorities appeared to use online commentators to divert attention away from the scandal, such as accusing Beijing News of being influenced by “foreign forces” and claiming that the report had “ulterior motives.”
Public response
Chinese citizens believe in general that the “edible oil poisoning” (食用油投毒) scandal is the latest in a history of food safety scandals in China stretching back at least 25 years. Some pointed out that mainland media previously exposed similar scandals in Guangxi and Hunan in 2005 and 2015 respectively.
Chinese citizens also referenced a speech by Xi Jinping on food safety at the Central Rural Work Conference on Dec. 23, 2013. According to mainland media reports about the speech on Sept. 23, 2014, Xi said:
- “There’s a high level of public concern about food safety, and the public threshold of [sparking concerns about food safety] is low. Once an issue arises, it can easily cause public panic and lead to mass incidents.”
- “Whether we can provide a satisfactory answer to the public on food safety is a significant test of our governance capability.”
- “If our Party cannot ensure food safety, or fails to do so consistently, people will question our qualification to govern.”
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July 10
Multiple videos posted by netizens from Henan Province showed many people rushing to buy home-manufactured edible oils. Information circulating on social media also noted that home oil presses were hot sellers on e-commerce platforms and there were suggestions about buying edible oils from Hong Kong.
July 13
The search phrase “sale of oil presses quadrupled overnight” (榨油機一夜之間銷量翻4倍) trended on Chinese social media.
Backdrop
The CCP will hold the Third Plenum of the 20th Central Committee from July 15 to July 18.
Our take
1. The response from Chinese citizens and the CCP authorities towards the “edible oil poisoning” scandal suggests that it is the most severe food safety crisis in mainland China since the melamine-tainted milk scandal in 2008.
There was widespread public outrage towards the scandal given that it significantly affects a broad strata of society, including CCP members and the Party elite. In particular, the scandal forces people to draw a link between the high incidence rate of cancer in China and food safety. The PRC National Cancer Center’s 2024 report noted that China had 4.8247 million cases in 2022, or the highest number of new cancer cases and deaths globally that year. Assuming a population of 1.4 billion people, the incidence rate of cancer in China was 344.62 per 100,000 people, or 170.9 percent of the global incidence rate (201.61 per 100,000 people). If China’s actual population was less than 1 billion, then the incidence rate would be 482.47 per 100,000 people, or 239.3 percent of the global incidence rate.
2. The CCP authorities’ initial silence, as well as belated effort to downplay and defuse the “edible oil poisoning” scandal, highlight the deficiencies of the CCP authoritarian system and its impact on Chinese society.
First, the CCP propaganda entities opted for deflection over addressing an issue of national concern head on. For instance, state media focused their efforts on criticizing the companies implicated in the scandal, but devoted minimal attention to the dangers of the act itself. Edible oils should never be transported in tankers used for toxic products because no amount of cleaning or sterilization is enough to prevent poisoning and ensure proper food safety standards. Meanwhile, the CCP authorities appeared to activate their online commentators to target Beijing News over its report and likely attempted to shut down the journalists at Beijing News responsible for exposing the scandal.
Second, the CCP authorities bear sizable responsibility for allowing “edible oil poisoning” to go on for many years despite it being a known scandal. Weak regulation and low food safety standards mean that the transportation industry can get away with using industrial oil tankers to transport edible oils to save costs (fuel and tolls account for nearly 70 percent of transportation costs), and food companies do not bother to specifically request that transportation firms use special tankers to make deliveries (much less have industrial oil trucks clean their tanks). Chinese transportation and food companies are inclined to ignore basic ethics and decency in their pursuit of profits and cost savings because the CCP spent decades destroying and denigrating traditional Chinese culture and Confucian values (retaining only a veneer for propaganda purposes) while promoting Party culture and its values like hatred and class struggle.
The CCP authorities could have enforced issues related to the transportation of edible and toxic oils if it wanted to with its strict control over trucking. As early as 2013, the authorities required that all trucks in China install and use the BeiDou navigation satellite system, which allows for the tracking of a vehicle’s location in real-time. The drivers of vehicles whose BeiDou system goes offline are liable to be hit with a maximum fine of 2,000 yuan. Had the CCP authorities wanted to resolve the oil scandal, they would have gotten a handle on it relatively quickly by tracking the transportation route of fuel trucks to see if they made any stops at food companies and issuing fines.
3. There has been some speculation about why the “edible oil poisoning” scandal broke out so close to the Third Plenum given Beijing’s usually tight narrative and propaganda control in the lead up to important political conclaves. Some notable theories include:
- The CCP authorities are trying to divert attention away from its COVID-19 vaccines and rumors that they are causing people to develop cancer. Hence, the authorities “allowed” the “edible oil poisoning” scandal to break so that the blame of rising cancer rates can be shifted to transportation and food companies.
- The “edible oil poisoning” scandal deflects attention away from the casualties and property losses caused by the breach of the first dyke in Huarong County in Hunan Province after massive flooding.
- Fierce factional struggle in the CCP elite led to the “edible oil poisoning” scandal being reported. Those who back this theory argue that mainland media and investigative reporting in general have been tightly restricted after Xi Jinping increasingly tightened social controls in China. Hence, the exposure of the scandal before the Third Plenum and the CCP authorities’ belated response are likely intentional, and are the work of factional elements who are looking to cast Xi in a bad light at a time when the propaganda apparatus is highlighting his achievements.
Most of the theories are plausible to a degree and cannot be completely ruled out. Regardless of which explanation is most valid, the “edible oil poisoning” scandal has dealt a severe blow to perceptions of Xi and the CCP’s governing capability, political credibility, and “quan wei” at a crucial time for the regime. In particular, Xi’s image as the “people’s leader” will take a hit as Chinese citizens recall his past statements on food safety and contrast them with the current reality. As economic conditions in China worsen and geopolitical pressures mount, incidents like the “edible oil poisoning” scandal stand a higher chance of triggering so-called “mass incidents” and social instability in the mainland.
We believe that the CCP authorities could punish some officials and executives over the “edible oil poisoning” scandal in an attempt to appease the public and play the “savior.” However, the scandal could become one among multiple catalysts for social unrest as the situation in China deteriorates.
